Cabinet Issues New Regulations for

On 18 September 2019, the Cabinet issued Decree No. 30 of 2019 (the “Decree”),[1] stipulating the regulations for the allocation of the proceeds from the disposal of state private property, thus reorganizing the manner of distribution of these proceeds.

Background

By default, lands not owned by other legal persons are considered state-owned. However, their ownership is public in nature until it is allocated to a particular authority, ministry, or body and declared state private property. In such case, said authority, ministry, or body could exploit such property or dispose of it through sale, lease, allocation, or assignment of usufruct rights. A series of successive laws have regulated this system, the latest of which is Law No. 144 of 2017[2] which put forth regulations and procedures related to the disposal of said state private property. The new Decree, issued by the Cabinet, specifies the rules related not to the disposal of said property per se but to the manner of allocation of the disposal proceeds.

The New Regulation

Authorities disposing of their state private property (which are referred to in the Decree as the “competent administrative authority”) must register the proceeds of the property’s sale in the State’s General Treasury, particularly in an account called “The People’s Right.” This comprises the sale proceeds in addition to examination and inspection fees. However, the competent administrative authority pays 10% of the examination and inspection fees (and not the sale proceeds) to the Military Survey Department of the Armed Forces as well as another 10% of the inspection fees only to the Egyptian Survey Authority for the services that these entities may have provided to the competent administrative authority in preparation of the disposal of the property. The Decree also gives the competent administrative authority the right to deduct from the sale proceeds the necessary amount to meet the inevitable requirements of the agreement but only if no amount was already included in the authority’s budget for such inevitable expenditure or if what was included in the budget did not suffice. All of this occurs through a request from the minister or governor or the chairman of the public authority that is selling the land, addressed to the Minister of Finance, who then issues the required approval. Where the land being sold is owned by a public authority or ministry and is being disposed of through the governorate in which the land is located by virtue of an authorization to sell, then 20% of the sale proceeds are to be allocated to the governorate to meet the requirements of executing a national project that was not included in its plan and which is necessary to execute. In such case, a request is to be made by the governor and it has to be approved by the Minister of Finance and the Minister of Planning, Monitoring, Administrative Reform.

Conclusion

The new Decree deals with one of the most delicate legal issues in the management of state finances, namely the sale of lands and the disposal of their proceeds. Instead of allocating to the Treasury all of the sale proceeds (to be used in accordance with the rules of the state budget), the Decree allocates a small percentage to the Egyptian Survey Authority and the Military Survey Department for their contribution in the sales, and, more importantly, it allows the public authority that is selling its lands to use a portion of the proceeds to meet the “inevitable requirements” of expenditure, which is a broad and loose term. It also allows the governorate in which the land being sold is located to access a portion of said proceeds for spending on national projects “which are necessary to execute,” another vague term. All of this might prompt public authorities that own lands to increase their sales for the purpose of financing their annual budget deficits, instead of for specific investment or economic purposes, which would be unconventional financial planning.   [1] Cabinet Decree No. 30/2019 with the purposes, regulations, procedures, and limits of allocating the proceeds from the disposal of state private property as per Law No. 144/2017, Official Gazette, Issue No. 37 (bis) (b), 18 September 2019. [2] Law No. 144/2017 with the rules and procedures for the disposal of state private property, Official Gazette, Issue No. 29 (bis), 22 July 2017.